China water projects to get big investment - Business - International Herald Tribune

BEIJING — The Chinese government plans to spend 1 trillion yuan by 2010 to build waste-water treatment plants and upgrade water distribution systems around China, the Ministry of Construction said Tuesday.

Of that amount, which is equivalent to $125.5 billion, as much as 330 billion yuan will be spent on the water projects in urban centers. As many as 278 cities lack proper treatment facilities and at least 30 cities have plants that operate at less than 30 percent capacity, the ministry said.

China wants to tap the capital and technology of overseas companies like Veolia Environnement to supply clean water for the country.

Shortages of natural water, worsened by rampant industrial pollution, plague the central and western provinces, which are facing China's worst drought in 50 years.

"We welcome water companies from all over the world to participate in the Chinese market," Qiu Baoxing, deputy minister for construction, said Tuesday at a press briefing in Beijing. "Companies including Veolia and Suez have already done very well in China's water treatment and recycling sector. This is proof that China's water sector is open."

Foreign financing in the industry in China is less than 10 percent, Zhang Yue, deputy director general for urban construction at the ministry, said at the briefing, without specifying whether the government has placed a cap on such investments. The government's priorities are to "pay attention to water safety and public interest," he said.

China's biggest water shortages may still be ahead because its urban population is expected to continue growing by as much as 15 million annually, bringing potential "regional water crises," Qiu said. Urban water users jumped by 78.7 million between 2000 and 2005 to 327 million, the ministry said.

The government has set a goal of treating 70 percent of urban wastewater by the end of 2010, up from 50 percent, Qiu said. The other half is "directly discharged," damaging the country's natural water resources, he said.

In 150 cities, no wastewater treatment fees were collected last year, the ministry said. The government wants to upgrade treatment systems nationwide while keeping water prices affordable. Water in China is priced at "20 percent of replacement," Elizabeth Economy, director of Asia studies at the Council on Foreign Relations in New York, said in June.

"Weak links," the ministry said, remain in the effort to create better water treatment and allocation systems. Overuse of water resources by an average of 10 billion cubic meters annually has caused the ground to sink in 50 cities, while irreparable damage has already been done to the ecology of some natural water resources, it said.

China's sprawling cities have been siphoning water from farmers, undermining the government's pledge to improve living standards in the countryside, which is home to 70 percent of the country's population. Rural water shortages threaten to stoke unrest, cut harvests and slow economic growth here.

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Guaranteeing water supplies to rural areas, where household incomes average less than a third of those in cities, is crucial to President Hu Jintao's goals of reducing social inequality and fostering sustainable growth. The government is building a $62 billion network of canals to move water to arid northern provinces, and it has pledged to increase spending in rural areas.

The number of protests involving more than 100 people rose to 87,000 last year from 74,000 in 2004 and 10,000 in 1994, according to the Ministry of Public Security in Beijing. The ministry declined to say how many of the demonstrations were related to water.

China's per-person water usage averaged about 2,200 cubic meters, or a quarter of the global average, according to the Ministry of Water Resources.

Factories and urban residents used 34 percent of the nation's water in 2004, up from 25 percent in 1998, the ministry said. That increase has cut grain production, which fell 8.4 percent to 469.4 million tons in the same period, according to the National Bureau of Statistics.

Rapid industrialization in countries like China is attracting Western companies that recognize a big potential for profits in water-related equipment and services, which already make up a global market estimated at $400 billion.

"Industrial complexes are igniting in China and Russia, and there is a huge need for companies to help them manage their water effectively," said William Roe, chief operating officer for Nalco, a water treatment company in Illinois that has stepped up sales efforts in emerging economies.

For example, Veolia, which is based in France, owns utilities that provide water and sewer services to 110 million people.

In the past few years, units of General Electric have bought four water companies: Betz Dearborn in 2001, then Osmonics, Ionics and, most recently, Zenon Environmental Systems, which makes ultrafiltration membranes. Last month, GE Energy Financial Services announced its first investment in water: $18 million in a wastewater reclamation plant in Atlanta.

Siemens, the German conglomerate, recently joined forces with Mekerot, Israel's biggest water utility, to explore new technologies to reuse scarce water in Israel, and ultimately to sell it to other parched nations.

Chemical companies are also taking an interest. Last month, Dow Chemical, which has made water-softening resins and membranes for treating water for 20 years, bought Zhejiang Omex Environmental Engineering, a Chinese company that adds three more technologies to Dow's portfolio.$@